After one of the largest meltdowns in airline history, Southwest Airlines has shared that the issues it faced over the holidays will cost the company upwards of $825 million.
More than 16,700 flights were canceled during one of the busiest times to fly, and after the airline processes customer refunds and upgrades its scheduling software, it is expected to take heavy losses.
In a securities filing, Southwest estimated that the disruptions faced will result in a net loss of between $725 million to $825 million in the fourth quarter of 2022.
The canceled flights alone are expected to cost the company an estimated $400 million in revenue, according to the filing. The remainder of the expected losses equate to the total amount the airline expects to spend on reimbursing customers, offering them perks and incentives, and overtime wages paid to its employees.
Among the perks and incentives being offered to customers are 25,000 frequent-flier points, a $39 refund, $149 reimbursement, and a $250 travel voucher.
The points and other reimbursements came as an apology from Southwest CEO Bob Jordan, who shared the news with customers via an email, according to a tweet from Zach Griff shared last week.
“I know that no amount of apologies can undo your experience,” Jordan wrote in the letter. “For those who have requested refunds, reimbursements, and/or are waiting to be reunited with your lost bag(s), those processes are being handled with great urgency and we appreciate your patience.”
The expected losses will carry massive impacts for Southwest, which made a reported $760 million in net income during the first nine months of last year.
Other impacts include scrutiny from the U.S. Department of Transportation, which criticized the company’s excuses for the debacle.
In a Dec. 29. letter to the airline, Secretary of Transportation Pete Buttigieg pointed to the numerous other airlines that were able to adjust despite the obstacle of inclement weather.
“The level of disruption Southwest customers have experienced over the Christmas holiday and into the New Year is unacceptable,” Buttigieg wrote to Jordan. “I want to reiterate what you have heard me say often: Americans expect when they purchase an airline ticket that they will arrive at their destination safely, reliably, and affordably.”
The Southwest Airlines Pilots Association has also taken shots at their company, saying the cancellations were “not a surprise to anyone but the leadership of Southwest Airlines.”
The union blamed the company’s refusal to modernize its pilot and crew scheduling software, despite the union often discussing its weaknesses. The union said that Jordan and his predecessor had been made aware of the issue.
The airline has since said it will update the software, but how quickly and how much it will cost is still unknown.
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